People in debt often choose a non profit debt consolidation program when they cannot afford the fees of more traditional consolidation services. When unexpected medical bills, student loans, credit card payments, and other loans start piling up, individuals without a solid financial plan can easily panic. Income flow is less than what is due. As payments fall behind, late fees and interest rates climb at an astonishing rate. Paying for an expensive for-profit money management service can seem unrealistic when money is the issue to begin with. Non profit programs tend to be less expensive, although that is not always the case. A non profit debt consolidation program can offer the lifeline an individual needs to get out of a financial bind and stay debt-free. These programs help debtors establish a repayment plan, consolidating multiple bills into one lower and affordable monthly payment often with a reduced interest rate and better terms. Service professionals negotiate with creditors to lower amount owed and waive or reduce late fees and other charges the debtor has incurred. Enrollment in a program will usually stop annoying collection calls from creditors demanding their money. They work on a person's behalf to reach an agreement that both parties can manage. Payments are made to the service who then distributes monies to the various collectors. Many non profit debt consolidation programs also offer free financial management and budget courses to help consumers stay on the right track. Sometimes, referrals to local social service organizations are made for further assistance.
What attracts many people to these programs are low fees or free services. Since a non profit debt consolidation program often gets funding from the federal government, it can keep fees and rates quite low. Banks, credit unions, financial organizations, and other financial counseling services also offer similar programs. Members of the National Foundation for Credit Counseling (NFCC) are required to provide services that are affordable to the consumer. For more than 50 years, the NFCC has ensured accurate reporting of services and fair repayment plans. Currently about 150 organizations are members and are bound by the reputation and promises made by the organization. "Know therefore that the LORD thy God, he is God, the faithful God, which keepeth covenant and mercy with them that love him and keep his commandments to a thousand generations." (Deuteronomy 7:9)
However, while receiving assistance from a non profit debt consolidation program may seem like a great solution, consumers must weigh both the pros and cons before making the final decision. Although some claim to pay for expenses through donations, those "donations" aren't always voluntary. A percentage of each payment may actually go towards organizational fees and not to the creditors. Others may withhold the first few installments to cover fees, meaning that it may be months before a creditor receives anything. These late payments can further destroy an individual's credit rating. Although financial counselors may also be able to settle an account at 50-75% the amount owed, the consumer may not know that this settlement is listed on his or her credit report. Settled accounts damage credit scores even further. These organizations will usually not let debtors know that they can even take care of the situation on their own by contacting creditors to negotiate lower payments on their own. This can be difficult and time consuming, but it is an option.
Unfortunately, as the popularity of such services is on the rise, so are scams. Many promise offers such as clearing debt or fixing credit scores within a few months. This is impossible. Just as debt takes time to incur, it takes time to fix. Credit scores are based on financial habits. These can't be fixed overnight. At one time, most non profit debt consolidation program scams were offered over the Internet. Under the disguise of a professional-looking website, scammers would collect personal information such as credit card and bank account numbers and then withdraw or spend money without the consumer's consent. Now, many advertise on radio or television under new terminology such as debt negotiation or settlement companies. Some will advertise services that are completely free, but fees are hidden within the interest rate or consolidation plan. Others claim to be local companies when they are actually managed overseas.
Choosing a non profit debt consolidation program doesn't have to be scary. There are legitimate organizations who truly want to help consumers with their financial problems. It may take a little effort to find those companies, but they are out there. Shop around. Ask for referrals. Check consumer guides and reported complaints with the Better Business Bureau and Federal Trade Commission (FTC). Make sure counselors are certified through the NFCC. Individuals must make sure that fees and collection processes are completely understood and in writing. Ask for proof of the company's 501(c)3 certificate of non profit status. However, all non profit means is that the organization's expenses are tax-deductible. That doesn't necessarily mean that their fees will be free or cheap. Be aware of companies that solicit business over the phone. Reputable organizations usually will not solicit, even through the FTC Telemarketing Sales Rule allows non profit organization special exemptions. Most importantly, don't provide personal information until credibility has been established.
Some organizations may market themselves under a Christian non profit debt consolidation program to appear more credible or reputable. While some may include a faith element and truly have good intentions, others are no different than other organizations. Consumers must not allow a Christian name to sway them from making all the necessary checks before signing. When in doubt, churches and other religious organizations may even offer or recommend services directly. Some receive funding from their parishioners or other third party entities that enables them to offers services at low cost. If this is the case, the service is probably trustworthy. But checking thoroughly will protect consumers who might otherwise be vulnerable to promises that organizations cannot possibly keep.
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